A Guide to How a Credit Score Simulator Works

By Bob Haegele · September 12, 2022 · 7 minute read

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A Guide to How a Credit Score Simulator Works

A credit score simulator is an online tool that can help you see how certain behaviors and decisions might impact your credit score in the future. It might take your existing credit history into account and how certain actions could affect your credit score.

For example, perhaps you open a new credit card or have an account sent to collections. A credit score simulator would take these marks into consideration and help you estimate the impact they may have on your credit score.

What Is a Credit Score Simulator?

A credit score simulator is an online, interactive tool that can help you assess how certain decisions or events will affect your credit score. Because everyone has a unique credit history, these tools can only help you to estimate the impact of changes to your credit score, rather than making this determination for certain.

Nevertheless, credit simulators can be useful, especially if you are working to improve your credit. There are many actions you could take that may affect your credit score — here are just a few examples:

•   Financing a home or car

•   Using a balance transfer credit card to consolidate your debt

•   Closing a credit card

•   Declaring bankruptcy

These are just a handful of the ways your credit score could rise or fall; there are many more examples. With so many possibilities, it can be difficult to predict how changes to your credit history will affect your credit score. Once you know what a credit card is, it quickly becomes apparent how a credit score simulator can help.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

How Does a Credit Score Simulator Work?

After gaining an understanding of how credit cards work, you can start to understand how a credit simulator works. Each credit score simulator is different, but there are some commonalities in how they work.

Some start with your current credit score provided by a credit reporting bureau, then let you see how some of the changes mentioned previously would affect your score if you were to make them. While there’s no guarantee they will be completely accurate, they should give you an idea of the potential impact on your credit score.

Other credit score simulators might guide you through several questions about your credit profile. The result estimates your current credit score based on your responses. For example, the myFICO credit score estimator asks you about things like how many credit cards you have, how long ago you opened your first card, and whether you’ve missed a payment.

Recommended: When Are Credit Card Payments Due

How Your Credit Score Is Calculated

Credit score simulators generally use popular credit scoring models to estimate your current or future credit score. For instance, they might use FICO® Score 8 or VantageScore 3.0. These models use certain credit factors to calculate your score.

While each credit scoring model is different, certain behaviors tend to have a positive influence on your credit score, regardless of the model. Typically, some of the factors affecting credit score are:

•   Payment history: This is usually one of the most important factors in the calculation of your credit score. To avoid a negative impact on your credit score, you’ll want to avoid being more than 30 days late on any credit card payments.

•   Credit utilization ratio: This ratio is simply the total outstanding balance on all of your credit cards divided by their total credit limit. One of the credit card rules is that you should aim to keep this ratio below 30%.

•   Derogatory marks: These are items like bankruptcies, tax liens, and collections. It’s best to avoid these altogether if possible, especially since they can stay on your credit report for seven to 10 years.

•   Credit age: Creditors like to see that you have a long history of responsible credit use. Thus, your credit score may be slightly more favorable if your oldest credit card is decades old. The same holds true for loans.

Recommended: Tips for Using a Credit Card Responsibly

What a Credit Simulator Can Do

A credit score simulator can help estimate either your current credit score or what your credit score might be in the future. The result is that they can help you better understand how different actions will increase or decrease your score.

Thus, they can help you prioritize which actions to take. Should you pay off your credit cards quickly, or should you focus more on your loans for now? Credit score simulators can help you answer these questions when the answer isn’t so obvious.

What a Credit Simulator Cannot Do

The main thing that credit simulators cannot do is tell you exactly what credit score you should expect to have at a given point in the future. There are simply too many variables at play to know with absolute certainty what your score will be.

For one, your credit card issuer might use a different credit scoring model. Another possibility is that there are other changes to your credit profile that could impact your score. Perhaps you finish paying off a credit card six months from now, but an emergency suddenly arises that results in you taking out a personal loan.

The fact that there are so many possible scenarios is why we say credit simulators can only help you estimate your score rather than tell you exactly what it will be.

When It Makes Sense to Use a Credit Simulator

It makes sense to use a credit simulator in certain situations. For example, suppose you plan to finance the purchase of a new car. That will certainly have some impact on your credit, but the effect will vary depending on your credit history. A credit simulator can help you estimate what that impact will be.

Credit simulators can also help you decide which actions to prioritize if you have a bad credit score. Many of these possible actions might improve your score, but chances are, some will help more than others. Over time, you can gain a better understanding of which kinds of actions tend to have the largest impact.

Other Tools to Monitor Your Financial Health

Credit simulators are not the only thing that can help you monitor your financial health. Here are some other tools to consider:

•   Credit score monitoring: While credit simulators can help you estimate how changes to your credit report will affect your score, credit monitoring tools give you credit score updates on an ongoing basis. They can also give you a breakdown of your credit factors and how your score has changed over time.

•   Budgeting tools: Budgeting tools are useful because they often let you sync all of your bank accounts and credit cards in one dashboard. You can then see all of your balances in real-time.

•   Identity theft protection: If your identity is stolen, it can have a major impact on your credit and your finances as a whole. Thus, it’s not a bad idea to have this protection just in case.

What Makes a Good Credit Score?

It’s tough to overstate the importance of having good credit. Nevertheless, what constitutes good credit will vary from person to person. The general idea is you must show creditors that you are a responsible borrower and that you aren’t going to default on your debt (in this case, your credit card).

This is why things like late payments and high credit utilization can drastically lower your credit score. Late payments suggest you may not be able to reliably make your payments. And a high credit utilization suggests you may have a higher risk of default as you are using a high percentage of the credit available to you.

The Takeaway

Credit score simulators are one tool that can help you assess how different behaviors can affect your credit score. Because they are just simulators, they may not be completely accurate. Still, they can give you an idea of what to expect and help you reach your financial pals.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Are the changes made by a credit score simulator guaranteed?

In short, no. Credit scores are complex and other factors could affect your score in the meantime. Nevertheless, credit simulators can help you better understand how various changes may affect your credit score.

How long do credit score changes usually last?

How long changes to your credit score last depends on reporting to credit bureaus. Each bureau has its own schedule, but credit card updates usually happen every 30 to 45 days. However, some changes — such as a bankruptcy declaration — can remain on your credit report for as long as 10 years.

How accurate is a credit score simulator?

Credit score simulators should be relatively good at estimating credit score changes based on the information provided or available to them at any given moment. However, credit reports can change frequently, and simulators can’t usually predict what will happen with your credit a day, a week, or a month from now.


Photo credit: iStock/millann

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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